Major steelmaker NKK Corp. said Tuesday that it will begin to supply electric power to trading house Mitsubishi Corp. this summer, making it the first Japanese steelmaker to retail electricity.
Following government deregulation of electricity sales to large-lot users in March, NKK launched a project to make better use of its power generating systems and facilities, it said.
Mitsubishi is expected to resell the electricity — to be received from NKK’s Keihin plant in Kawasaki and possibly other non-power companies — to other users.
In addition, NKK said it is considering making a bulk purchase from Tokyo Electric Power Co. and reselling the power to an industrial park next to the Keihin plant to earn extra revenue.
Japanese steelmakers are moving into the electricity market in a bid to fight slack performance in their own industry.
In most cases, steelmakers have entered the wholesale electricity market, in which they supply electricity to the power companies themselves.
Kawasaki Steel Corp., Sumitomo Metal Industries Ltd. and Kobe Steel Ltd. have already begun wholesaling power. They have said they are not considering the retail business at present due to its relatively low profit margin.
Nippon Steel Corp., however, is examining the feasibility of retail sales of electricity, according to industry sources.
Kawasaki Heavy woes
Standard & Poor’s Corp. has lowered its public information-based rating on Kawasaki Heavy Industries Ltd. to BBpi from BBBpi.
“The downgrade reflects the company’s weak prospects for meaningful debt reduction over the next few years amid an ongoing difficult business environment and limited near-term benefits from its restructuring efforts,” S&P said.
Kawasaki has been accelerating its group restructuring efforts, but it will still be several years before the company can benefit fully from its improved cost position, the U.S. credit rating agency said.
Kawasaki’s debt has risen over the past few years, reaching 487 billion yen as of March and resulting in a total debt to capital ratio of 73, it said.
It will be difficult for Kawasaki to achieve meaningful debt reduction in the near term, given that its restructuring efforts are likely to involve additional costs, it said.